In the automobile industry, an Original Equipment Manufacturer’s (OEM) spares business has two major, and at times conflicting, needs to satisfy;&nbsp;1) ensure delivery of spares to the customers at the point of requirement in the shortest possible time and&nbsp;2) to do so in a manner that is financially beneficial to the company.&nbsp;&nbsp;1)Importance of delivery of sparesOnce an OEM (Original Equipment Manufacturer) has sold an automobile (car, truck, etc.) to a consumer, it becomes a commitment for the OEM to ensure that the spares and service are seamlessly available to the customer. In the case of some large OEMs, this could involve making more than 1.5 lakh individual parts readily available at all times! If customers (or the mechanics) struggle for parts whenever they want to repair or maintain their vehicles, they judge the OEM poorly. Frequent poor sales and service experience are known to negatively impact vehicle sales of a company.&nbsp;2)The financial challenge in spares managementEnsuring the availability of spares is naturally a major challenge due to the enormous variety of parts involved across the portfolio of the OEM’s vehicles. With new models being launched with increasing frequency, the number of spare part SKUs that have to be serviced also increases. Moreover, OEMs have to maintain this large variety of parts over the long life span of the automobiles (very often for more than 7 years). To complicate things further, some of these are in frequent demand while others are needed very infrequently. Unfortunately, this business has a large number of these infrequently demanded “stranger” items!&nbsp;Consequently, whenever automobile OEMs try to improve spares availability, the cash tied up in slow-moving inventory balloons! Further, it is not enough for a part to be available at the warehouse or the distributor’s location; all parts have to be available or delivered in the shortest possible time to the point of requirement (service dealers, retail shops, etc., from where the customers buy them).&nbsp;Because of the conflicting objectives of spare parts management, most automobile OEMs in India struggle with parts availability. The ramifications of such unavailability further lead to inefficiencies in service centres and ironically take away the advantage of what should have been a monopoly market for the automobile OEMs.&nbsp;Impact of unavailability at service dealershipsDelay in parts availability at service dealerships leads to high turnaround times for vehicles coming in for service and disgruntled customers. This, in turn, can have a cascading effect on service bay availability and delays in repairing other vehicles in the service center. Servicing in an OEM dealership is usually more expensive than getting it done outside. Unfortunately, most often, these higher prices do not translate into superior service in terms of vehicle turnaround times in the service centres; hence, it is not surprising to find customers seeking out cheaper alternatives. Therefore, most vehicles leave the automobile OEM service network after the warranty period. If we take cars – according to ACMA, while nearly 20% of the cars on the road are more than 15 years old, the typical age profile of cars reporting at dealerships is less than seven years.&nbsp;Impact of unavailability in the aftermarketMany automobile OEMs allow parts to be sold outside their network, more so for the older models. This is to ensure good reach of parts to counter the gaps in their existing service network. But, distributing large no of parts through a network of distributors, and small retailers comes with its own challenge. Most of these market players are small businessmen who find it difficult to invest large sums as capital.&nbsp;The problem of unavailability is further aggravated by the presence of few, yet very large, wholesalers in the network. Their presence is assumed to be the answer to reach out to far-flung areas. So, automobile companies sell in bulk to these large wholesalers at cheaper rates with the hope that they will help the company improve ‘reach’ and get sales from these unserved areas. Unfortunately, these wholesalers are passive sellers who sell only to those who approach them and therefore do not serve this purpose effectively. Moreover, they end up creating more area conflicts in current territories than serving the deeper geographies. Most OEMs have resigned themselves to live with this –the management bandwidth in the spares and service business is already fully occupied in expediting spares in the distribution and service network.&nbsp;These conditions impact the last-mile availability of original parts, creating an ideal condition for small local players to manufacture and sell counterfeits. Most of the counterfeit sellers also offer much better service to retail points due to their geographical concentration. Easy availability, a customer in dire need of parts (when the vehicle is down), and the non-availability of original parts make it a viable market for counterfeits.&nbsp;Consequently, no other consumer product category has seen counterfeiting to this extent in the Indian market. ACMA assesses that 36% of the components in the aftermarket are fake. It is also thought to be growing 9-11% annually. Since counterfeiting is usually of the OEM’s intellectual property, in addition to eating into the aftersales of the vehicle manufacturer, it may also spoil the vehicle and endanger the life of the driver.&nbsp;<figure class="image"><img style="aspect-ratio:933/933;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//1_1709892150.png" width="933" height="933"></figure>Core IssueIn the automobile industry, these chronic availability issues have their roots in how typical OEMs operate. They send in 3-month rolling schedules, based on sales forecasts of individual parts, to their vendors, who then manufacture and supply as per the schedules. In addition to supply being unreliable, the fact that forecasts are inherently error-prone creates situations wherein some items are stocked out, and others are in surplus. At the same time, demand tends to be skewed with high month-end spikes due to the prevalent practice of pushing material at month-ends (with or without incentives) to meet sales targets. This is one of the reasons why distributors tend to keep 45 to 60 days of stock even when the nearest company warehouse is just a few days away. &nbsp;When many parts are inherently slow-moving, pushing them to the channel partners aggravates the problem. The speed at which stock rotates deteriorates because the channel partner is exposed to a smaller demand and highly variable demand in a restricted geography. Thus, this practice impacts the buying power of channel partners and their ability to restock when items are sold out. A distributor’s daily working capital woes force him to restrict his business, and many tend to service only a limited number of retailers (usually larger retailers) who are perceived as low credit risk. The net impact is reduced availability of spares in the market.&nbsp;Direction of solutionAny solution should aim at ensuring parts are made available in the shortest possible time. But this has to be realized at the same or lower levels of inventory, and nobody in the entire chain should be burdened with extra investment.&nbsp;For this, it is imperative to classify parts into various categories and create a distribution strategy based on that. Based on the frequency of the demand at the point of sale, parts can be classified thus:&nbsp;1. Fast mover Parts: These are regular maintenance parts like the Filters, Oils, Break Lining, Clutch, Belts, Oil Seals, Battery, Tyre, Wiper, etc., which are replaced as part of regular maintenance. In terms of sales, these are usually 60 to 70% of the total spare parts sold.&nbsp;2. Erratic Parts: These are parts that are prone to frequent damage like the gear parts, bumper, windshields, etc. They may also be exclusive parts needed for preventive maintenance of less popular models or consumables or items needed after minor accidents. While the vehicles of a particular model may not frequently visit a particular service centre, as far as the customer is concerned, these are regular items, and they will not have the patience to wait for long.&nbsp;3. Slow Parts: These are infrequently used repair parts or failure parts like a Radiator, Window Glass, Fuel Injection, Crank Shaft, etc.&nbsp;4. Stranger parts (rare parts): These include major or rare Accident parts, parts with a small chance of failure or parts with large replacement cycles like Axles, Transmission, Cabin, Frame, Door, Fuel Tank, Central Locking System, etc. Accident insurance claims, which are usually made in these cases, generally take 10 to 14 days. As long as the parts can be made available within this window, there would not be any hold-up for customer service due to unavailability.&nbsp;5. Out-of-circulation parts: These are usually stranger parts that belong to 4 to 10-year-old models of the OEM and are no longer in production. And even though these parts are not used in current models, the OEM is legally expected to maintain these parts for repairs and replacements.&nbsp;<figure class="image"><img style="aspect-ratio:933/933;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//3_1709892290.png" width="933" height="933"></figure>Distribution StrategyBased on the above categorization it is evident that the frequency with which each part is demanded at a point of sale and customers’ willingness to wait can be used to decide which SKU has to be stocked where. For example, while the fast movers have to be readily available at the service dealerships (retailers), customer service is not usually jeopardized if a stranger part is not immediately on hand. Similarly, most customers are willing to wait for the out-of-circulation parts. This means that while the frequently needed parts have to be held closer to the consumption point, the less frequently demanded items can be held further upstream.&nbsp;&nbsp;This will help reduce the SKUs that have to be held at different stocking points, but the challenge in this environment is that VOR situations (Vehicle Off The Road), customer intolerance to waiting and repair bay blocking force service points to keep a large number of SKUs. But by questioning the assumption that this range has to be carried individually as they currently do, a mutually beneficial method can be evolved. A system of parts sharing can be set up between dealerships in a locality (cluster warehouse) in such a way that each dealer in the cluster will only carry a limited but independent set of erratic parts that others can source in the cluster. This can ensure that any part is available to another within 2 hours!&nbsp;&nbsp;A judicious decision of where to hold which kind of parts ensures easy availability of even stranger parts. However, OEM dealerships/channel partners also need to be able to service their customers within their limited capital. For this, they have to hold less inventory of the kind of parts required to be by them.&nbsp;&nbsp;Stock is a function of lead time, therefore significantly reducing the lead time of the dealership/distributor from their next node (the regional warehouse) in the service distribution network can aid in reducing the stock the dealer has to maintain. Similarly, availability at a central warehouse can help reduce inventory at the regional warehouse.&nbsp;&nbsp;Thus, when lead times are reduced, the minimum inventory to be held at various nodes in the network for every SKU will reduced, enabling the stocking of an increased range of spares in the supply chain for the same working capital.&nbsp;In addition to decoupling the supply lead time from the replenishment time, a central warehouse is also needed to act as a dampener to absorb fluctuations in spares demand. The greatest variability in parts demand is logically at the point of sales, while the CWH, which is an aggregate location servicing demands from all points, experiences the least variability. Using this benefit of aggregation, a central warehouse can serve many different destinations in the supply chain far more efficiently whilst keeping the lowest possible overall stock in the system.&nbsp;Inventory Creation and Movement – from Push to PullIn the automobile industry, for the distribution strategy to succeed, availability has to be ensured at all points in the supply chain: in the central warehouse, regional warehouses, distributors/dealerships, and retailers. This is only possible if the supply chain moves away from the damaging ‘push’ system and implements a ‘pull’ i.e. instead of pushing inventory downstream each node quickly responds and replenishes the depletion from the inventory maintained at the subsequent node.&nbsp;<figure class="image"><img style="aspect-ratio:933/933;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//2_1709892311.png" width="933" height="933"></figure>&nbsp;Therefore, vendors in the system have to supply as per actual consumption from the central warehouse instead of forecast-based schedules. The prevalent approach of schedule-based planning for spares sourcing not only creates desync with real demand, but it also leads to FG inventory pile-up either at the vendor’s end or at the warehouse when the item is unexpectedly in surplus. Moving from this push system to a pull system wherein the movement of inventory is based on actual consumption takes away the need to arrive at accurate forecasts and send in monthly schedules. A communication system that indicates the level of stocks against a norm (daily) can be set up between the OEM’s warehouse and vendors for a daily order system.&nbsp;The vendor can then manufacture the corresponding parts and replenish stocks at the OEM as per priority, set based on actual level stock in comparison to the norm. This system enables the suppliers to receive purchase orders in a hassle-free manner. Constant change in order priorities that cause capacity loss for suppliers and unneeded FG can also be eliminated.&nbsp;Similarly, consumption-based inventory movement can be triggered between central warehouse, regional warehouse, service centres, distributors and even retailers (refer figure 2). At any two links, the inventory should move based on immediate ‘pull’ signals based on actual consumption, with the buffer levels signalling priority for replenishment. A fast courier service has to be engaged for rapid movement of stranger and slow parts from the regional and central warehouse to the point of sales or service.&nbsp;BenefitsThis model of managing spares will give immediate benefit to the automobile service dealerships and distributors. Higher sales achieved as an effect of better availability in the entire supply chain and without an increase in inventory allows dealers to earn high ROI and gives them the motivation to invest more resources towards improving reach and customer service in the market.&nbsp;But in order for this model to achieve its full potential in the aftermarket, cross-country dumping by the wholesalers which, forces distributors to erode their margins, has to be prevented, and price parity has to be maintained. Once wholesalers are removed from the network and replaced with dedicated distributors assigned to clear territories, the higher ROI would enable them to service retailers in their territories with regular beat plans. Consequently, the company will experience higher overall sales without any discounts or schemes.&nbsp;What’s more, since the material is ordered by downstream supply chain partners based on consumption, this process hitherto fraught with firefighting will move into auto mode. This and the reduction of the month-end skew of orders can give a much needed respite to the management team, giving them an opportunity to focus on initiatives to further increase market share.&nbsp;Industry studies peg the current size of the components business in the Indian automotive aftermarket to be between ₹28,000 Crs. - ₹24,800 Crs., whereas the service market is estimated at ₹8,000 Crs. The combined value is projected to rise to ₹60,000 Crs. by 2020. A recent Automobile Components Manufacturers Association (ACMA) study reveals coverage figures as low as 15-20%, indicating that most OEMs address this market ineffectively. However once the distribution network of the company spreads into the nooks and corners of the country, OEMs can not only increase vehicle sales, but they can also augment revenues by claiming this vast untapped opportunity in the aftermarket.&nbsp;&nbsp;

Key Takeaways

Only 15% of India's aftermarket is addressed by OEMs! What can OEMs do to tap into this opportunity?

Spare the trouble

In the automobile industry, an Original Equipment Manufacturer’s (OEM) spares business has two major, and at times conflicting, needs to satisfy;&nbsp;1) ensure delivery of spares to the customers at the point of requirement in the shortest possible time and&nbsp;2) to do so in a manner that is financially beneficial to the company.&nbsp;&nbsp;1)Importance of delivery of sparesOnce an OEM (Original Equipment Manufacturer) has sold an automobile (car, truck, etc.) to a consumer, it becomes a commitment for the OEM to ensure that the spares and service are seamlessly available to the customer. In the case of some large OEMs, this could involve making more than 1.5 lakh individual parts readily available at all times! If customers (or the mechanics) struggle for parts whenever they want to repair or maintain their vehicles, they judge the OEM poorly. Frequent poor sales and service experience are known to negatively impact vehicle sales of a company.&nbsp;2)The financial challenge in spares managementEnsuring the availability of spares is naturally a major challenge due to the enormous variety of parts involved across the portfolio of the OEM’s vehicles. With new models being launched with increasing frequency, the number of spare part SKUs that have to be serviced also increases. Moreover, OEMs have to maintain this large variety of parts over the long life span of the automobiles (very often for more than 7 years). To complicate things further, some of these are in frequent demand while others are needed very infrequently. Unfortunately, this business has a large number of these infrequently demanded “stranger” items!&nbsp;Consequently, whenever automobile OEMs try to improve spares availability, the cash tied up in slow-moving inventory balloons! Further, it is not enough for a part to be available at the warehouse or the distributor’s location; all parts have to be available or delivered in the shortest possible time to the point of requirement (service dealers, retail shops, etc., from where the customers buy them).&nbsp;Because of the conflicting objectives of spare parts management, most automobile OEMs in India struggle with parts availability. The ramifications of such unavailability further lead to inefficiencies in service centres and ironically take away the advantage of what should have been a monopoly market for the automobile OEMs.&nbsp;Impact of unavailability at service dealershipsDelay in parts availability at service dealerships leads to high turnaround times for vehicles coming in for service and disgruntled customers. This, in turn, can have a cascading effect on service bay availability and delays in repairing other vehicles in the service center. Servicing in an OEM dealership is usually more expensive than getting it done outside. Unfortunately, most often, these higher prices do not translate into superior service in terms of vehicle turnaround times in the service centres; hence, it is not surprising to find customers seeking out cheaper alternatives. Therefore, most vehicles leave the automobile OEM service network after the warranty period. If we take cars – according to ACMA, while nearly 20% of the cars on the road are more than 15 years old, the typical age profile of cars reporting at dealerships is less than seven years.&nbsp;Impact of unavailability in the aftermarketMany automobile OEMs allow parts to be sold outside their network, more so for the older models. This is to ensure good reach of parts to counter the gaps in their existing service network. But, distributing large no of parts through a network of distributors, and small retailers comes with its own challenge. Most of these market players are small businessmen who find it difficult to invest large sums as capital.&nbsp;The problem of unavailability is further aggravated by the presence of few, yet very large, wholesalers in the network. Their presence is assumed to be the answer to reach out to far-flung areas. So, automobile companies sell in bulk to these large wholesalers at cheaper rates with the hope that they will help the company improve ‘reach’ and get sales from these unserved areas. Unfortunately, these wholesalers are passive sellers who sell only to those who approach them and therefore do not serve this purpose effectively. Moreover, they end up creating more area conflicts in current territories than serving the deeper geographies. Most OEMs have resigned themselves to live with this –the management bandwidth in the spares and service business is already fully occupied in expediting spares in the distribution and service network.&nbsp;These conditions impact the last-mile availability of original parts, creating an ideal condition for small local players to manufacture and sell counterfeits. Most of the counterfeit sellers also offer much better service to retail points due to their geographical concentration. Easy availability, a customer in dire need of parts (when the vehicle is down), and the non-availability of original parts make it a viable market for counterfeits.&nbsp;Consequently, no other consumer product category has seen counterfeiting to this extent in the Indian market. ACMA assesses that 36% of the components in the aftermarket are fake. It is also thought to be growing 9-11% annually. Since counterfeiting is usually of the OEM’s intellectual property, in addition to eating into the aftersales of the vehicle manufacturer, it may also spoil the vehicle and endanger the life of the driver.&nbsp;<figure class="image"><img style="aspect-ratio:933/933;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//1_1709892150.png" width="933" height="933"></figure>Core IssueIn the automobile industry, these chronic availability issues have their roots in how typical OEMs operate. They send in 3-month rolling schedules, based on sales forecasts of individual parts, to their vendors, who then manufacture and supply as per the schedules. In addition to supply being unreliable, the fact that forecasts are inherently error-prone creates situations wherein some items are stocked out, and others are in surplus. At the same time, demand tends to be skewed with high month-end spikes due to the prevalent practice of pushing material at month-ends (with or without incentives) to meet sales targets. This is one of the reasons why distributors tend to keep 45 to 60 days of stock even when the nearest company warehouse is just a few days away. &nbsp;When many parts are inherently slow-moving, pushing them to the channel partners aggravates the problem. The speed at which stock rotates deteriorates because the channel partner is exposed to a smaller demand and highly variable demand in a restricted geography. Thus, this practice impacts the buying power of channel partners and their ability to restock when items are sold out. A distributor’s daily working capital woes force him to restrict his business, and many tend to service only a limited number of retailers (usually larger retailers) who are perceived as low credit risk. The net impact is reduced availability of spares in the market.&nbsp;Direction of solutionAny solution should aim at ensuring parts are made available in the shortest possible time. But this has to be realized at the same or lower levels of inventory, and nobody in the entire chain should be burdened with extra investment.&nbsp;For this, it is imperative to classify parts into various categories and create a distribution strategy based on that. Based on the frequency of the demand at the point of sale, parts can be classified thus:&nbsp;1. Fast mover Parts: These are regular maintenance parts like the Filters, Oils, Break Lining, Clutch, Belts, Oil Seals, Battery, Tyre, Wiper, etc., which are replaced as part of regular maintenance. In terms of sales, these are usually 60 to 70% of the total spare parts sold.&nbsp;2. Erratic Parts: These are parts that are prone to frequent damage like the gear parts, bumper, windshields, etc. They may also be exclusive parts needed for preventive maintenance of less popular models or consumables or items needed after minor accidents. While the vehicles of a particular model may not frequently visit a particular service centre, as far as the customer is concerned, these are regular items, and they will not have the patience to wait for long.&nbsp;3. Slow Parts: These are infrequently used repair parts or failure parts like a Radiator, Window Glass, Fuel Injection, Crank Shaft, etc.&nbsp;4. Stranger parts (rare parts): These include major or rare Accident parts, parts with a small chance of failure or parts with large replacement cycles like Axles, Transmission, Cabin, Frame, Door, Fuel Tank, Central Locking System, etc. Accident insurance claims, which are usually made in these cases, generally take 10 to 14 days. As long as the parts can be made available within this window, there would not be any hold-up for customer service due to unavailability.&nbsp;5. Out-of-circulation parts: These are usually stranger parts that belong to 4 to 10-year-old models of the OEM and are no longer in production. And even though these parts are not used in current models, the OEM is legally expected to maintain these parts for repairs and replacements.&nbsp;<figure class="image"><img style="aspect-ratio:933/933;" src="https://new-stage-be.vectorconsulting.in/storage/editor_uploads//3_1709892290.png" width="933" height="933"></figure>Distribution StrategyBased on the above categorization it is evident that the frequency with which each part is demanded at a point of sale and customers’ willingness to wait can be used to decide which SKU has to be stocked where. For example, while the fast movers have to be readily available at the service dealerships (retailers), customer service is not usually jeopardized if a stranger part is not immediately on hand. Similarly, most customers are willing to wait for the out-of-circulation parts. This means that while the frequently needed parts have to be held closer to the consumption point, the less frequently demanded items can be held further upstream.&nbsp;&nbsp;This will help reduce the SKUs that have to be held at different stocking points, but the challenge in this environment is that VOR situations (Vehicle Off The Road), customer intolerance to waiting and repair bay blocking force service points to keep a large number of SKUs. But by questioning the assumption that this range has to be carried individually as they currently do, a mutually beneficial method can be evolved. A system of parts sharing can be set up between dealerships in a locality (cluster warehouse) in such a way that each dealer in the cluster will only carry a limited but independent set of erratic parts that others can source in the cluster. This can ensure that any part is available to another within 2 hours!&nbsp;&nbsp;A judicious decision of where to hold which kind of parts ensures easy availability of even stranger parts. However, OEM dealerships/channel partners also need to be able to service their customers within their limited capital. For this, they have to hold less inventory of the kind of parts required to be by them.&nbsp;&nbsp;Stock is a function of lead time, therefore significantly reducing the lead time of the dealership/distributor from their next node (the regional warehouse) in the service distribution network can aid in reducing the stock the dealer has to maintain. Similarly, availability at a central warehouse can help reduce inventory at the regional warehouse.&nbsp;&nbsp;Thus, when lead times are reduced, the minimum inventory to be held at various nodes in the network for every SKU will reduced, enabling the stocking of an increased range of spares in the supply chain for the same working capital.&nbsp;In addition to decoupling the supply lead time from the replenishment time, a central warehouse is also needed to act as a dampener to absorb fluctuations in spares demand. The greatest variability in parts demand is logically at the point of sales, while the CWH, which is an aggregate location servicing demands from all points, experiences the least variability. Using this benefit of aggregation, a central warehouse can serve many different destinations in the supply chain far more efficiently whilst keeping the lowest possible overall stock in the system.&nbsp;Inventory Creation and Movement – from Push to PullIn the automobile industry, for the distribution strategy to succeed, availability has to be ensured at all points in the supply chain: in the central warehouse, regional warehouses, distributors/dealerships, and retailers. This is only possible if the supply chain moves away from the damaging ‘push’ system and implements a ‘pull’ i.e. instead of pushing inventory downstream each node quickly responds and replenishes the depletion from the inventory maintained at the subsequent node.&nbsp;<figure class="image"><img style="aspect-ratio:4000/3484;" src="https://backend.vectorconsulting.in/storage/editor_uploads//auto-article-4-img-2_1734862711.jpg" width="4000" height="3484"></figure>Therefore, vendors in the system have to supply as per actual consumption from the central warehouse instead of forecast-based schedules. The prevalent approach of schedule-based planning for spares sourcing not only creates desync with real demand, but it also leads to FG inventory pile-up either at the vendor’s end or at the warehouse when the item is unexpectedly in surplus. Moving from this push system to a pull system wherein the movement of inventory is based on actual consumption takes away the need to arrive at accurate forecasts and send in monthly schedules. A communication system that indicates the level of stocks against a norm (daily) can be set up between the OEM’s warehouse and vendors for a daily order system.&nbsp;The vendor can then manufacture the corresponding parts and replenish stocks at the OEM as per priority, set based on actual level stock in comparison to the norm. This system enables the suppliers to receive purchase orders in a hassle-free manner. Constant change in order priorities that cause capacity loss for suppliers and unneeded FG can also be eliminated.&nbsp;Similarly, consumption-based inventory movement can be triggered between central warehouse, regional warehouse, service centres, distributors and even retailers (refer figure 2). At any two links, the inventory should move based on immediate ‘pull’ signals based on actual consumption, with the buffer levels signalling priority for replenishment. A fast courier service has to be engaged for rapid movement of stranger and slow parts from the regional and central warehouse to the point of sales or service.&nbsp;BenefitsThis model of managing spares will give immediate benefit to the automobile service dealerships and distributors. Higher sales achieved as an effect of better availability in the entire supply chain and without an increase in inventory allows dealers to earn high ROI and gives them the motivation to invest more resources towards improving reach and customer service in the market.&nbsp;But in order for this model to achieve its full potential in the aftermarket, cross-country dumping by the wholesalers which, forces distributors to erode their margins, has to be prevented, and price parity has to be maintained. Once wholesalers are removed from the network and replaced with dedicated distributors assigned to clear territories, the higher ROI would enable them to service retailers in their territories with regular beat plans. Consequently, the company will experience higher overall sales without any discounts or schemes.&nbsp;What’s more, since the material is ordered by downstream supply chain partners based on consumption, this process hitherto fraught with firefighting will move into auto mode. This and the reduction of the month-end skew of orders can give a much needed respite to the management team, giving them an opportunity to focus on initiatives to further increase market share.&nbsp;Industry studies peg the current size of the components business in the Indian automotive aftermarket to be between ₹28,000 Crs. - ₹24,800 Crs., whereas the service market is estimated at ₹8,000 Crs. The combined value is projected to rise to ₹60,000 Crs. by 2020. A recent Automobile Components Manufacturers Association (ACMA) study reveals coverage figures as low as 15-20%, indicating that most OEMs address this market ineffectively. However once the distribution network of the company spreads into the nooks and corners of the country, OEMs can not only increase vehicle sales, but they can also augment revenues by claiming this vast untapped opportunity in the aftermarket.&nbsp;&nbsp;

Download PDF

Find out how OEMs can ensure seamless service while meeting their financial goals

Let's Empower Growth